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You’re using words that you don’t understand the meaning of. Anyways, the person you’re responding to isn’t being pedantic. They’re describing a complete mecha

You’re using words that you don’t understand the meaning of. Anyways, the person you’re responding to isn’t being pedantic. They’re describing a complete mechanism for how a bank could arbitrage the money. If they could get 11% returns from AMMs with the same risk profile as a savings account, then they could essentially make free money by setting up savings accounts for other people, where they could offer them 5% returns, and then reinvest that money their clients deposited into the AMMs and receive 11% back. Of which they would only need to pass on 5% to the clients who deposited the money into the savings account, keeping 6% of the returns without having to commit a single dollar of their own. So why hasn’t any bank done this yet?

rglullis 4y ago
And you are trying to argue claims that I never made, such as: > get 11% returns from AMMs with the same risk profile as a savings account Where did I say that risk of being an LP is the same as putting the money on a savings account? I didn't. You are making all this exposition and trying to lecture me based on an assumption that I never made and that I know to be false. IOW, this is at best a strawman and at worst it's disingenuous. In either case it's fucking annoying. Read again. All I said was that even today being an LP in a stabletoken is beating a savings account. - Did I say it was without risks? No. - Would I say that this is relatively low risk, compared with other "investments" in crypto? Yes. - Compared with money in a bank? No. - Do I think it is worth it? As part of your strategies, yes. - Would I tell people to take money from their savings and do this? No, of course not. - Why not? Because not only it has risks, but also because if more people did it the (and if the transaction volume at the exchanges stayed the same) the ROI would go down. - Is that the same as "arbitrage"? Not exactly. Liquidity providers make money even if all they are doing is to buy and sell tokens that keep a peg to the USD. The issue here is that flooding the pool with more cash is diluting the profitability. - Could some whale come, put a bunch of liquidity in a pool and keep it only while the profitability is higher than the savings account? Shouldn't that count as a "arbitrage opportunity"? No, because there are costs to on-and-off ramp, there are risks associated with crypto and if you want to do that kind of arb, you'd be better off my looking into crypto money markets - which also have its own risk/reward profile. What else do you need to be spelled out so that you can stop with the stupid strawmen?
- plonk 4y ago
  You said: > Early last year I was getting 2% per month on USDC/DAI and about 1% per month on USDC/EURS. Even today one can get a lot more than you'd get on a savings account. I don't understand why you compared USDC's return to a savings account's if you didn't mean that USDC is a better investment than a savings account. > - Compared with money in a bank? No. Yes you did, above. > - Did I say it was without risks? No. > - Would I tell people to take money from their savings and do this? No, of course not. Then it makes no sense to compare USDC to a savings account. The risks are much higher. > - Could some whale come, put a bunch of liquidity in a pool and keep it only while the profitability is higher than the savings account? Shouldn't that count as a "arbitrage opportunity"? No, because there are costs to on-and-off ramp, there are risks associated with crypto and if you want to do that kind of arb, you'd be better off my looking into crypto money markets - which also have its own risk/reward profile. But all arbitrage is risky, that's not against the definition and neither are on/off-ramp fees. Even if you're "better off" doing something else by your criteria, the opportunity is still there. Edit: not to be too pedantic but: > - Is that the same as "arbitrage"? Not exactly. Liquidity providers make money even if all they are doing is to buy and sell tokens that keep a peg to the USD. The issue here is that flooding the pool with more cash is diluting the profitability. You're getting dollars somewhere and selling them where you will get more money for it. The opportunity goes lower as more people use it. Still sounds like an arbitrage to me, or something that's functionally the same.
  - rglullis 4y ago
    > I don't understand why you compared USDC's return a savings account First, not just "USDC". I was describing the process of being a liquidity provider, which involves a token pair. Second, the fact that I compared with a savings account does not mean that I am saying that the risks are the same. I used savings account because I wanted to illustrate that this is something that can be done holding only "stabletokens", i.e, without speculating on the value of the token itself. I could've used money markets or fx funds, the idea would be the same. > Not to be pedantic (...) The opportunity goes lower as more people use it. Still sounds like arbitrage to me. Imagine you have an ice cream stand and you start making good money because you find a nice spot by the beach. Some days you are selling close to 100% of your stock, some days you even need to go get more at the supplier. Some of your competitors find out and move their trucks next to you. Nobody changed their prices, and the ice cream being sold by all of you are all of equivalent quality. Now, the street as a whole is still a "good" spot, the customers are still spending the same amount of money as before, but you are not making as much money because now you are splitting the customer base with the other guys. Is that "arbitrage"? I certainly wouldn't call it that. There was at first some information asymmetry, but calling every asymmetry an "arbitrage opportunity" seems like a stretch to me.

rglullis 4y ago

And you are trying to argue claims that I never made, such as: > get 11% returns from AMMs with the same risk profile as a savings account Where did I say that risk of being an LP is the same as putting the money on a savings account? I didn't. You are making all this exposition and trying to lecture me based on an assumption that I never made and that I know to be false. IOW, this is at best a strawman and at worst it's disingenuous. In either case it's fucking annoying. Read again. All I said was that even today being an LP in a stabletoken is beating a savings account. - Did I say it was without risks? No. - Would I say that this is relatively low risk, compared with other "investments" in crypto? Yes. - Compared with money in a bank? No. - Do I think it is worth it? As part of your strategies, yes. - Would I tell people to take money from their savings and do this? No, of course not. - Why not? Because not only it has risks, but also because if more people did it the (and if the transaction volume at the exchanges stayed the same) the ROI would go down. - Is that the same as "arbitrage"? Not exactly. Liquidity providers make money even if all they are doing is to buy and sell tokens that keep a peg to the USD. The issue here is that flooding the pool with more cash is diluting the profitability. - Could some whale come, put a bunch of liquidity in a pool and keep it only while the profitability is higher than the savings account? Shouldn't that count as a "arbitrage opportunity"? No, because there are costs to on-and-off ramp, there are risks associated with crypto and if you want to do that kind of arb, you'd be better off my looking into crypto money markets - which also have its own risk/reward profile. What else do you need to be spelled out so that you can stop with the stupid strawmen?

plonk 4y ago
You said: > Early last year I was getting 2% per month on USDC/DAI and about 1% per month on USDC/EURS. Even today one can get a lot more than you'd get on a savings account. I don't understand why you compared USDC's return to a savings account's if you didn't mean that USDC is a better investment than a savings account. > - Compared with money in a bank? No. Yes you did, above. > - Did I say it was without risks? No. > - Would I tell people to take money from their savings and do this? No, of course not. Then it makes no sense to compare USDC to a savings account. The risks are much higher. > - Could some whale come, put a bunch of liquidity in a pool and keep it only while the profitability is higher than the savings account? Shouldn't that count as a "arbitrage opportunity"? No, because there are costs to on-and-off ramp, there are risks associated with crypto and if you want to do that kind of arb, you'd be better off my looking into crypto money markets - which also have its own risk/reward profile. But all arbitrage is risky, that's not against the definition and neither are on/off-ramp fees. Even if you're "better off" doing something else by your criteria, the opportunity is still there. Edit: not to be too pedantic but: > - Is that the same as "arbitrage"? Not exactly. Liquidity providers make money even if all they are doing is to buy and sell tokens that keep a peg to the USD. The issue here is that flooding the pool with more cash is diluting the profitability. You're getting dollars somewhere and selling them where you will get more money for it. The opportunity goes lower as more people use it. Still sounds like an arbitrage to me, or something that's functionally the same.
- rglullis 4y ago
  > I don't understand why you compared USDC's return a savings account First, not just "USDC". I was describing the process of being a liquidity provider, which involves a token pair. Second, the fact that I compared with a savings account does not mean that I am saying that the risks are the same. I used savings account because I wanted to illustrate that this is something that can be done holding only "stabletokens", i.e, without speculating on the value of the token itself. I could've used money markets or fx funds, the idea would be the same. > Not to be pedantic (...) The opportunity goes lower as more people use it. Still sounds like arbitrage to me. Imagine you have an ice cream stand and you start making good money because you find a nice spot by the beach. Some days you are selling close to 100% of your stock, some days you even need to go get more at the supplier. Some of your competitors find out and move their trucks next to you. Nobody changed their prices, and the ice cream being sold by all of you are all of equivalent quality. Now, the street as a whole is still a "good" spot, the customers are still spending the same amount of money as before, but you are not making as much money because now you are splitting the customer base with the other guys. Is that "arbitrage"? I certainly wouldn't call it that. There was at first some information asymmetry, but calling every asymmetry an "arbitrage opportunity" seems like a stretch to me.